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Financial Life Planning - What It Is and How It's Different

Financial Planning Investing

Taking the first steps in financial planning is a big leap in your life as a person or as a couple. However, financial planning is not just about having the right amount of money in savings, insurance coverage, retirement savings, or other forms of savings. Although these are important, financial planning should first emphasize on helping you live a full, fun and “rich life.” Your money should not just act as a safety net but also as a means for you to reach your goals and enjoy life in the best way you know how.

What Is Financial Life Planning?

Financial life planning can be well described as a holistic financial planning process that puts the interests of a client first when drawing up a plan to help them manage their finances. Financial life planning focuses on increasing the client’s well-being and ability to reach their personal goals, instead of just focusing on the numbers. From the beginning, this approach helps the client identify their current circumstances, priorities, aspirations and dreams; enabling your financial advisor to create a holistic financial plan that allows their client to live their definition of a meaningful and fun life.

How Is Financial Life Planning Different From Traditional Financial Planning?

Financial life planning focuses on bringing together quantitative data and qualitative information during the financial planning process. The quantitative side is the numbers side, while the qualitative side is the side that seeks to have a deeper understanding of a client’s values, money mindset, aspirations, money fears and money habits among more. Financial life planning seeks to help clients strike a balance between the two sides and hence enable them to live life to their full potential.

Traditional financial planning focuses solely on the quantitative side-that is budgeting, estate planning, insurance coverage, retirement savings, taxes, and so on. While this is not bad at all, just focusing on this alone and ignoring the qualitative aspects of a client’s life can reduce their life to numbers on a page-and no one really wants such a life.

Why Work With a Financial Life Planner?

Life is highly unpredictable and so are financial markets and investments. To create a solid financial plan that allows you to achieve your financial and life goals simultaneously, it is important to work with a financial life planner. It is also imperative that you hire an advisor who will take their time to learn about you and comprehend your financial concerns and desires fully.

The number of financial life planners is on the rise as more and more financial professionals understand the importance of integrating life planning into financial planning. 

However, one great misconception about financial life planning is that it involves therapy. Part of the process may center on finding out why you currently manage your money the way you do (most probably if it’s not the best way), but that is not psychotherapy. It’s all about uncovering your money history and prospects, and hence helping your financial advisor to understand you wholly. The effects of the process may however be therapeutic.

The process will also entail some elements of life coaching as your advisor helps you examine your life and understand the most important goals to you. They will help you pinpoint challenges, life transitions, and other money-related aspects of your life that you probably never considered important. From there, they will engage you in developing a financial plan that best aligns your life goals to your current financial situation, as well as your expected financial situation in the future.

All in all, financial life planning is about some integral questions; what do you think will bring meaning and purpose to your financial life? What would you like to accomplish or experience so that in the end you will feel you have lived your life fully? What would you do if you had more time and money?

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.